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Details on coverage in an Insurance Policy
What is covered
Health Insurance covers hospitalization expenses incurred as an in-patient in a Hospital which will include: Room, Boarding and Operation Theatre charges; Fees of Surgeon, Anesthetist, Nurses, Specialists; and the cost of diagnostic tests, medicines, blood, oxygen, appliances like pacemaker, artificial limbs and organs etc. Hospitalization for a minimum period of 24 hours is a must.
What is NOT Covered
It is more important to know what is not covered in most of the insurance policies. While one must read the exclusion since it can vary from policy to policy, the general exclusions are:
- Congenital (by birth) and Pr-existing diseases (PED). The per-existing diseases are those illness which one suffered at time of taking of the policy. These may be declared or undeclared. The basic principal of Insurance is of Utmost Faith, the policy is issued based on the declaration given by insured, however at time of claim, if the illness is found to have existed prior to date of signing of the application form, the claim is rejected. However in case insured declares the illness and Insurance company accept and underwrite the same, PED are waived from 4th continuous year of the policy.
- Expenses incurred on alternative form of treatment like Naturopathy, Ayurvedic, Homeopathic etc.
- Dental – unless required due to accident
- Obesity related
- Cosmetic surgery, etc.
There are certain exclusion for first / second or up to fourth year. Please refer to Exclusion clause in the policy carefully before you handover the cheque and purchase your next policy.
The objective of the exclusion is that these are diseases which a person may be carrying at time of taking up the policy and treatment / surgery may be postponed for year or more. Most common illnesses are cataract, Hernia, hydrocele, piles etc.
Young couple look for maternity coverage, which is either not covered or covered after a waiting period of 2 years (for eg. Max Bupa ) to 4 years (Exclusive plan from Apollo Munich) the coverage varies from company to company for eg. For normal delivery Apollo allows expenses upto Rs 25000 and for caesarean delivery upto Rs 40000/-, Max Bupa allows expenses upto Rs 50000/-. Maternity expenses are normally paid for two deliveries only.
As already mentioned, most of insurance companies allow day care surgeries to be covered. However one must look into number of day surgeries that are covered by Insurance company. Max Bupa covers all the day care surgeries, Apollo Munich specifies 146 surgeries where as ICICI Lombard specifies only 9 day care surgeries.
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How to Choose the best product for your needs?
There are broadly two kinds of product that are available
- Hospital Cash – They provide lump sum benefit in case of hospitalization regardless of the expense incurred. They are basically defined benefit product (i.e. regardless of actual expense incurred, they will pay fixed per-defined payouts)
- Health Insurance – These are indemnity kind of products which reimburses actual expenses incurred, subject to overall coverage (Sum Insured or SI) taken by insured.
Hospital Cash
Hospital Cash are recommended as supplementary product and not main product to provide your family protection from any unplanned hospitalisation. However in case you have Health Insurance coverage (plan) from your employer, you can use them to supplement since they pay based on photocopy of bills (original are used to claim actual expense incurred from Health Insurance provided by the employer). Details of the same will be discussed later. In short these are not to be treated as Health Policy, even though the premium paid enjoys the benefit under Section 80D of Income Tax Act. In case, these are the only health policy available for certain section of people (people who have undergone Coronary Artery Bypass treatment). One must go for it.
Health Insurance
In Health Insurance, one can choose between Individual cover or Floater Cover. In case of Floater Cover, a chosen sum assured floats over the entire family and entire amount can be used by any member in case of emergency. The advantage its offers is lower premium as compared to individual cover, better coverage and better sub –limit (certain insurer like National Insurance etc specifies limits like room rent as % (1%) of Sum Insured and hence higher sum insured means higher limits). The disadvantage being if family consists of elderly members, chances of usage of limit by senior member are higher and hence, lower limit might be available for younger people. Also premium is calculated based on age of the eldest member of family (– thus loading of premium on entire family). It is advisable to go family floater policy and not to include senior people (people above age 55-60) in such policy. They should be covered under separate floater plan or individual plan.
Critical Care Products
Also available are Critical Care products. They are similar to Hospital Cash, in payouts i.e. they pay lumps-sum amount in case the insured contact the listed critical disease and survive for 30 days after the diagnosis. This coverage is recommended Strongly to those having a family history of the critical illness and do not have enough saving since any of these illness can financially ruin the family. Tata Executive Wellsurance is a combination of Critical Insurance & Hospital Cash which pays not only lump-sum amount in case insured is diagnosed with critical insurance (and survive for 30 days after the diagnosis of critical illness), but also pays fixed payout in case of hospitalization. It pays a fixed amount for surgeries. While mostly the Critical Insurance is offered by Life Insurance companies (they normally offers as rider along the life insurance policy) stops either after person attains 65 to 70 years of age or in case insured contact any one the listed critical illness, Tata Wellsurance is whole life plan and it does not stop even of person insured is diagnosed and benefit is paid out. Thus ensuring that person is covered against other critical insurance for life time.
Top Up Products
Top Up products are also available which pays only after per-decided threshold in single illness. Say Top Up of Rs 5 Lac with threshold of Rs 3 Lac will reimburse expenses up to Rs 5 Lac only when expense incurred on any one illness exceed Rs 3 Lac. It is obvious that such coverage is utilized when on suffers from Critical illness like Cancer. This is available on individual as well as Floater basis.
Super Top Up
Also available is Super Top Up (From United India Insurance Co.) which is akin Top Up plan, the difference being Super Top comes into effect when one has utilized one’s Health Insurance up to Thresh hold. For eg. Super Top up of Rs 7 Lac with Thresh Hold of Rs 3 Lac will reimburse hospitalization expenses up to Rs 7 Lac after one has exhausted Rs 3 Lac limit. This too is available on Individual as well Floater basis.
Top Up & Super Top plans are economical and very useful in enhancing coverage. Earlier maximum health insurance was available for Rs 5 Lac. Recently most of the private insurance companies have started offering Health insurance upto Rs 10 Lac. Only Max Bupa offers Health insurance up to Rs 50 Lac. Those who wish to go for coverage of over Rs 10 Lac or those who wish to take coverage only from Public Sector (Government) Insurance companies can use these plans to achieve their objective economically.
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Term Insurance Explained
When an insurance policy is purchased to give coverage for a predefined duration of time (term) , it is known as a Term Insurance Policy. For example in my case I took a home loan for 10 Lacs. To avoid the burden on the family in case of unforseen situation, I opted to take a term insurance plan with a coverage of 10 Lacs, thus by paying a low EMI of approximately INR 5500 each year, I have the security that in case of my death, my family will receive death benefit of 10L so that the home loan can be settled and thus no burden is incurred by the family.
One has the option to choose the period of cover and since term insurance only gives protection it has no value towards saving or investment and thus remains low cost option for providing security and benefits in case of death of policy holder.
Term Insurance can also have addon’s in the form of Dread Disease Rider, Personal Accident Benefit Rider etc. to increase coverage.
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A new way to Save Tax in India by RGESS
Government has announced “Rajiv Gandhi Equity Savings Scheme – RGESS” with an objective of encouraging flow of savings of small investors in domestic capital market.
Eligible investors will get additional tax benefit of up to Rs.5,150 u/s.80-CCG by investing up to Rs.50,000/- in RGESS eligible securities/MF schemes. This benefit is over and above benefit u/s.80-C.
Mutual Fund houses have lined up exclusive schemes that would invest in RGESS eligible securities. By investing in them, investors will be eligible for additional tax benefit apart from potential appreciation.
As a first step, you need to open your Demat account for investing in RGESS eligible securities / MF schemes.
The same Demat account can be used for maintaining your other investments like MF ELSS, Gold ETF, Corporate Bonds etc.,
Please note, RGESS is not only for tax payers. Non-tax payers also can invest in them as a regular investment.
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What is my worth?
You are the most priceless person on this planet for all your family members and friends and it is difficult to say how much coverage is a good amount. In terms of identifying or putting a value the fact is that there is no hard & fast rule. It is like deciding the size of umbrella one need to protect one’s family from unseasonal rain. Obviously if an adult uses a child’s umbrella to protect from rain, it would still drench him and any size of umbrella may not be able to protect one from unleashing torrential rains.
The decision on amount of coverage is based following factors:
- Age – Higher the age, higher is coverage needed.
- City of residence – Cost of treatment is higher in Metro & A Class town as compared to B & C category town and hence need for higher coverage
- Number of family member covered – More the number of people covered (specially under floater plan) higher the coverage needed.
- Living Standard / Life Style – Some people like the best facility /lifestyle and would not like to settle for B category hospital.
Considering the increasing cost of treatment, we recommend people living in Metro & A class towns and with age above 45 to go for minimum coverage of Rs 5 Lakh for family. Younger people may go for coverage of Rs 3 Lakh and increase the same as they progress in life.
More to come soon…
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